The virtues and sins of PPP have been so widely, all but exhaustively, discussed, that I couldn’t presume to add much to the debate in a few lines, but I would suggest you approach PPP with an attitude along the lines of “Averages (even honestly calculated averages) mislead.”

Headcount, or number of lawyers per firm, ought to be, if we think about it non-reflexively, something we would be well to be of two minds about. On the one hand, the higher your total headcount, the more your firm is a force to be reckoned with. Heavyweights are taken more seriously than middleweights who are taken more seriously than welterweights.

But on the other hand, counting heads is a fairly blunt instrument, somewhat like evaluating global cities primarily by the size of their overall population. It’s germane, of course, but far from what we’re really interested in: The business community, strong and weaker industries, the rule of law and the regulatory burden, the population’s education and skills, the residential and architectural and transportation infrastructure, the performing arts and cultural scene, restaurants and shopping, the climate. Population ends up a footnote.

RPL is the most interesting: It’s probably my “desert island” metric. Consider:

  • It’s tough to game. Both revenue and number of lawyers are what they are.
    • If you want to game revenue, there may be spectacular consequences, as we’ve learned from a recent high-profile implosion. (As a former securities lawyer, I think I can say without fear of contradiction that every single major financial scandal of the past several decades has had revenue recognition misrepresentations as a core part of the fraud.)
    • And the number of lawyers is pretty much the number of lawyers
  • RPL is in some rough and ready sense a proxy for quality in the he eyes of your clients. The more they’re willing to pay to rent one of your lawyers for a year, the more valuable they presumably find what you do. If you doubt me, the firm with year after year the highest reported RPL is Wachtell.

Which brings us to topline revenue.

It’s time to ask whether its importance hasn’t become over-rated. To those of you who might think it’s the number one metric above all others, I invite you to reconsider. I believe there’s a lot less there than meets the eye.

  • Bald revenue numbers obscure the highly material impact of creeping increases in (a) inflation; and (b) headcount growth. Over just the last five years, these two factors have grown at a combined rate of just shy of 25% for the AmLaw 100. In other words, that’s how fast the “average” AmLaw 100 firm would have had to grow just to stay even in real performance terms. (See CAGR for Dummies.)
  • We all know that there are quick and easy ways to juice revenue fast and that it’s of a different order of magnitude, challenging and demanding, to grow it in ways that endure. The raw numbers don’t reveal which is which. For example, Asian markets are notorious for their seemingly inexhaustible capacity for generating revenue without profits. But judiciously targeting carefully curated laterals with meaningful potential but modest books, and integrating them into the firm and cultivating their potential over a matter of years—that takes time and dedication.

This was pithily summed up to me by one managing partner I was meeting with a few weeks ago who expostulated that “I could grow our revenue by $50-million this quarter if I felt like it—and lose plenty of money on it.”

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